Digital Transformation

A blank slate

Digital disruption can give agile start-ups the edge against market leaders, whose legacy systems often hold them back. Without a bold response, established players will lose market share.

by Tom Roberts (contact)
7 minute read

Latest figures show that the UK is one of the world's leaders in digital technology adoption, with more than 80% of households now having broadband, and 71% of adults using smartphones [1].

This unprecedented access to real-time information has resulted in hyper-inflated consumer expectations. Now consumers are always connected, they expect the same from brands, along with a fast, efficient, and high quality service.

With slick apps and websites, companies like Airbnb and Uber have established new customer networks and have rapidly acquired market share in the UK hospitality and transport industries respectively. ASOS and Amazon have swiftly excelled by using journey mapping software and customer data to dominate online commerce for many product categories.

So why are the more established organisations struggling to meet these consumer expectations?

The problem with disruption

Surprisingly, the size and longevity of most market leaders may be the reason for their struggle. To enact the change required to address new expectations, established firms have many hurdles to overcome such as: updating existing systems, reforming procedures and retraining staff to accommodate these new consumer expectations.

Organisations new to a market, on the other hand, can rapidly develop customer-focused products and services that attack vulnerabilities in the incumbent's value chain. They can then enter a market with a better overall experience for customers, while for an established company the challenge is more complex.

UK banks are an example. They provide multiple services to their customers, but often lack ongoing customer engagement. Consumers typically hear from their banks because of regulatory requirements, not as a result of customer experience programmes.

A new London-based bank sees this passive approach to customer engagement as a vulnerability and a point of differentiation. The company offers a credit card with a statement that includes a real-time list of purchases that more closely resembles a Facebook feed than a monthly account report. In doing so, it has turned the passive bank statement into an active customer engagement platform. The bank is still in beta, but as evidence of the interest in its customer-centric approach, Monzo raised £1m in 96 seconds in a recent crowdfunding campaign, with over 30,000 users already registered and 200,000 people on the waiting list [2].

The ongoing threat from disruptors

However, examples like this can be misleading. Executives who see the success of disruptors may, at first glance, conclude that to avoid obsolescence their company only needs to digitise existing workflows and customer communications. This approach, though common, does not neutralise the threat from disruptors – because the customer experience, essentially, remains the same.

Disruptors, in contrast, do much more than just replicate the established firm's services digitally. Once customers move to the disruptor's platform for one reason, the company will work to provide them with other services and aim to fulfil their heightened expectations.

After Amazon conquered the book market, its executives noticed that many other consumer goods suffered a similar problem to bookstores: products were digitised and on the respective websites, but the logistics were below customer expectations. So Amazon solved the problem with reliable, inexpensive overnight delivery in line with modern, heightened customer expectations. This, in turn, has disrupted product categories as varied as DIY, electronics and fashion.

What is the solution?

What can organisations do to meet customer expectations and avoid being overtaken by a digital disruptor?

1) Start with a ‘blank slate’
First, management should review relevant case studies about disruptors and acknowledge that a 'blank slate' response is required. Simply improving internal operations and optimising financial decisions will not help much, if at all, in combating the threat. Instead, companies need to develop a new strategy to deal with the changing landscape.

2) Change the organisational mind-set
This approach needs to be accompanied by a major organisational mind-set change. A change that moves the company from a focus on “what we do” to “who we serve”. Additionally, this change should come from the board level so that customer-centric programmes are given high priority throughout the firm.

3) Start a customer satisfaction measurement programme
Companies should implement programmes measuring customer satisfaction in order to understand consumer's heightened expectations. Customer satisfaction can be captured through surveys and analysed using a Voice of the Customer (VOC) process or by using a standard metric such as Net Promoter Score (NPS).

4) Identify pain points and points of delight
Once measurements are in place, firms should find out what customers think of its products and services by both identifying pain points and discovering instances when the company is exceeding expectations. Then, armed with this information, executives need to deliver targeted operational changes to address specific problem areas and engineer more points of delight.

5) Move quickly
Doing so should not, however, be a lengthy exercise. Digital disruptors move quickly and so companies should adopt an 'agile' approach to operational changes. This means that executives need to be prepared for new, experimental programmes to fail, but in a way where the organisation learns from failure. Subsequent attempts should then be designed with the lessons learned in mind.

6) Incubate ideas, but...
Such business experiments can take place outside of the normal business boundaries, say with an internal 'idea incubator' or an ‘innovation cell’. Any success programmes need to be fed back into the existing business. Otherwise, the innovations appear tactical and niche, instead of strategic and transformative to the business.

Most of all, take action

Defending a firm from digital disruption isn't complicated, but organisations do have to take action. They must focus more on the customer, listen for feedback, and implement the changes required in a way that lives up to modern customer expectations. Using Six pillars of Customer Experience Excellence as a benchmark for service delivery can help to shape the different layers of focus required.

While the customer-first strategy is critical, implementing it does not necessarily mean that a market leader won't end up losing market share, especially if the digital disruptor is already moving in.

With a blank slate companies can take a fresh look at the new, digital experiences their customers expect, and redesign their product and services to meet them through experience consulting. Such a change in approach and mind-set will be a potent force in retaining customers and keeping the disruptors at bay.

Learn more about how to make your business stand out through digital transformation.

 

[1] Office for National Statistics.

[2] Figures correct as of August 2016 via http://uk.businessinsider.com/banking-app-mondo-rebranding-to-monzo-2016-8

Latest stories

Sign up for monthly insights:

This website uses cookies to provide necessary site functionality and improve your online experience. By using this website, you agree to the use of cookies as outlined in KPMG's online privacy statement.